Who is the Wizard of Oz?

By Sherry F. Ellis, P.A.
Is communicating with your Mortgage Lender like communicating with The Wizard of Oz? This is not an article to simply regurgitate the problem. This article is to share some insight on how Florida Bankruptcy Courts have offered solutions, solutions that have worked.
Once upon a time, struggling homeowners wanting to do the right thing, contacted their mortgage lenders in hopes of modifying their mortgage and keeping their home. They were told, they had to be in arrears, fill out lengthy paperwork, disclose their financial records, assets, income, etc. The homeowners did everything they were supposed to, mailed in the packet of voluminous paperwork and waited with baited breath. Often times the paperwork was rejected for a miniscule reason and it was corrected, mailed back to the lender only to be rejected again. Other times homeowners received a reduction for a few months while the process underwent further scrutiny by the lender. In the interim, the homeowner waits and waits, to find out their modification did not go through and now they are even farther in arrears on their mortgage payments. They may try to mail in a partial payment and it is not accepted. They try to mail in a full payment and it is rejected because now they are in foreclosure.
Circuit Court Judge Lee Hayworth knew homestead homeowners were frustrated with lack of communication with their lenders. Homeowners felt like their lender was the Wizard of Oz and they would never get the opportunity to talk with them more less meet them. When discussing foreclosures and the thought of losing one’s home, it is important to note that there are Judicial States and Non-Judicial States. Florida is a Judicial State. Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security for the loan. The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court. If the court finds the debt valid, and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale. Judge Lee Haworth wanted homestead owners to feel heard. Lenders should not be able to hide after serving a complaint, so Judge Haworth paved the way to the Yellow Brick Road. He implemented and executed an administrative order establishing Circuit-wide Homestead Foreclosure Conciliation Program. This program provides the Homestead owner the opportunity to request a mandatory Conciliation Conference with the Lender. His cutting edge technique provided homestead owners the opportunity to force the Wizard of Oz (lenders) to come forward and communicate.
As of August, 2011 Florida was number one among Mortgage Delinquency Rates in the United States, with 20 percent or more of the mortgages delinquent by 60 plus days. Millions of homeowners are losing their homes and less than 5 percent of borrowers get loan modification outside of Bankruptcy. Orlando U.S. Bankruptcy Court made keeping debtors in their homes a priority. They did not regurgitate the problem, they offered a solution. Spring 2010, the Bankruptcy Judges in the Northern District of Florida asked Standing Chapter 13 Trustee Laurie K. Weatherford in Orlando to come up with a Federal Modification Mediation Program. In the past 18 months the success rate in the Orlando area has been 75 percent. This Federal Mediation Modification Program is now being introduced in the Sarasota/Bradenton area.
Lenders are finally getting the message that people do not want to file Bankruptcy, they have to file Bankruptcy due to a lack of job, health, spouse and the economy. The origin of the word Bankruptcy can be traced back to Italy during the Medieval Period. The Bankruptcy Act of 18908 was the first piece of modern day legislation to extend protection to corporation from creditors. Since then, the laws have evolved and Bankruptcy seeks the dual purpose of benefitting the debtor, the creditor and society as a whole. Most homeowners in our area simply can’t pay their mortgage, property taxes and/or maintenance fees, it is not that they don’t want to. When lenders fail to listen to the homeowners and foreclose, they are not only losing the mortgage payment but they have to pay all the other fees associated with the property as well.
The other solution for many primary residence holders in our Middle District of Florida Bankruptcy Court is a Chapter 13 debtor’s ability to do a motion to value claims secured by junior liens on the debtor’s principal residence and to strip off those liens. In other words, the Bankruptcy Court has the authority to strip off wholly unsecured junior lien holders on a Chapter 13 debtor’s primary residence conditioned upon the debtor obtaining a discharge or on further order of the Court. With options such as these, there may not be a need for a Yellow Brick Road in the near future.

Sherry Ellis Law, PLLC